On travels in developing countries, especially big tourist ones such as India, there are always people, usually cute children, disabled, or elderly, at the big landmarks swarming around trying to get tourists to buy souvenir trinkets.
A couple of things about these trinkets: they cost very little to make, usually; there is very little demand for them in the actual country where they are produced and sold; they are cheap ( to us), and their target buyer is a tourist. If you ever read travel books or talk to a native, they will tell you to barter over these items; you could get a much better deal. What may start at a 20 dollar price could easily be bartered down to 10 or even 5, or throw in a key chain, too and maybe a snow globe of the Taj Mahal. This tells us about the differences in standards of living and the value of currency. $20 could buy food for someone for probably 2,3, even more weeks in India. The price, to the seller, is very high. But to an unsuspecting American tourist who may spend $20 getting their nails done regularly, this price could seem well worth it. The fact that the value of money can be so different requires us to be aware of the exchange rate when we go to another country.
This generally raises a conflict, though. By bartering, are you being unfair; are you taking advantage of someone. Like the idea in class about "Trade Can Make Everyone Better Off" as long as there is equal power on both sides of the trade, you may ask yourself: is there equal power? Or, on the other hand, is bartering to $5 the same as paying $20 in the U.S. (the actual value for the object) because the standard of living and the difference in currency rates are so different?'
To go back to Principle #8, I just started wondering about if the standard of living is lower in most of India compared with most of the United States because in general, the things being produced don't have a strong enough demand or world market whereas in the U.S. there are generally strong markets for the items produced, or have been in the past, because they are larger, more manufactured items. (I know there are exceptions to both of these assumptions for both countries, but thinking generally.)
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I think this also deals with Mankiw's second principle: The Cost of Something is What You Give Up to Get It. People value different things. For those tourists, the small trinkets mean something small: an authentic, unique memento. However, this probably does not measure up to how much money the sellers need to profit in order to live. But when discussing bartering, who can really put a price tag on either of those things?
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I can identify with your point: Standards of Living depend on a country's production. Jamaica (my home), a developing country that also depends on tourism for most of its foreign exchange faces similar economic and trade problems as that of India. Because Jamaica is small and lacks the capital and natural resources such as that of the US, we depend alot on imports from other countries. This definitely does ruin our economy because we even import some of the things that our own farmers can produce themselves, but because of how the capitalist economy is set up, "trade makes eveyone better off" we have to trade like this. At home for example, a bracelet that may cost $300 JA dollars (equivalent to $3.25 US may be sold in a tourist destination for about $10 or even more. Reading your article has challenged my mind to think deeper about the actual meaning of this principle, it really does stand true.
ReplyDeleteLots of items sold to tourists are overpriced, and not just in foreign countries. Think about overpriced tourist goods like a soda at Disney World, a concert t-shirt, or any souvenir at a tourist attraction in the Upper Pennisula. Vendors overcharge tourist because they know that they will pay a high price. So why are tourists willing to pay such a high price for an item? Perhaps it is because of the low supply, souvenir items are usually concentrated in certain areas. There is also the convenience factor that this item is something they would want and it's right there.
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When I think of principle 8: A country's standard of living depends on it's ability to produce goods and services. I wonder how can that be when the U.S. and other Western countries are using exploitative labor practices towards the people of under-developed and developing nations. While this a form of trade and allows the people in specific countries to specialize in what they do best, but is it really a fair trade? T
ReplyDeleteI think the country's standard of living doesn't really affect how the local natives go about selling their attractions to tourists coming into the country. They know the tourists for the most part don't understand the differences in money and that they can get more money out of them. So why shouldn't they get the most they can out of them when it is pocket change to them. If you are on the street selling stuff, you always want the most you can get out of someone.
ReplyDeleteBeing of Indian origin, this post really hit close to home.
ReplyDeleteI may not fully understand the 8th principle, but if my understand is correct, I personally would not say this is the reason why India is economically struggling right now.
In my opinion, it is the lack of interest from all of the Indian community. By that, I mean there is a rich India and poor India- there is no "mid-class family". Though the 'rich' India (a.k.a educated Indian people), are getting richer, they are not doing anything to help the poor people from getting out of their economic slum- which in turn does not help India's economy.
It's like you said, though the little souvenirs or toys may be worth say 50 rupees (equivalent to about a dollar)- it means very little to a big business man who is working and India, and even less for a tourist coming from a Western country. However, if you haggle it down to say 30 rupees, those 20 rupees (20 cents) mean virtually nothing to you, but may cost a dinner for the poor salesman. The problem however lies, when the buyer KNOWS the sales man cannot survive if he does not sell it for something.. anything, and thus goes to as low as he can go, even if it means nothing to the buyer.
Furthermore, though it seems like the salesman is getting 30 rupees, in actuality he's getting very very little. I remember buying a toy from one of these sellers on the street and bout it for 20 rupees (it was originally 40 but I wanted to try my bargaining skills). I showed it to my dad and my dad said though he ended up getting 20 rupees in his hand, what he probably originally paid for it was somwhere near 10-15 rupees, while it normally only costs 2-3 rupees to make. So it is the big manufacturers who are making most of the money, not the sellers.
I see you addressed this in your post, however I'd like to reiterate that this is what I feel is killing the economy. In order to fix it, rich and poor India, along with the politicians (who I feel are corrupt but that's another thing all together) must work together to try to sustain a balance of wealth.
I'm not sure whether this case can be perfectly explained by Principle #8, since the souvenirs' price are usually unreasonably higher. It is more like a voluntary exchange that makes everyone involved better off. I believe sometimes the tourists know pretty well that the trinkets' actual value is less than their price. People still choose to buy them just for keeping a beautiful memory and they are willing to pay.
ReplyDeleteThis reminds me of a few of the novels I had to read as a part of my freshman seminar. In these books when americans would travel to lesser off countries they would through coins in the muddy water and watch the native boys swim after them. For their ammusement it cost thema quarter but that quarter could have meant food for that boy or going hungry that night.
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